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Q: My mother passed away in 2010, leaving me everything in her will. The only thing of real
value was her house.

I have a quitclaim deed from her, and I have been making monthly payments on the mortgage. My
name isn’t on the mortgage. I rented the house for a couple of years, but it is currently
unoccupied and listed for sale. It hasn’t garnered much attention.

Someone who saw the for-sale sign contacted me and was interested in purchasing the house on a
contract basis. I’m unsure whether I want to do a contract sale or not; I’m more concerned with how
this process would work when there is both a quitclaim deed and a mortgage, still in my mother’s
name, that needs to be paid.

A: We’re sorry for your loss. You have several issues that affect your situation. You seem to
have in your possession a quitclaim deed from your mother to you, but that document has not been
recorded. Until that deed is recorded, in the eyes of third parties, your mother or her estate is
the owner of the home.

If you were to record that deed, you would become the sole owner of the home. Although the home
would still have a mortgage, that mortgage would not be personal to you. As long as the monthly
mortgage payments are paid to the lender, the lender should be willing to accept payments from
you.

Once the home is sold, however, the lender will expect repayment on the debt that it is owed.
But you would not be responsible for any deficiency if the home were to sell for less money than
what is owed to the bank.

Generally, mortgage lenders will allow property transfers between family members without
triggering the due-on-sale clause. Almost all residential mortgage loans contain a provision that
effectively says that the lender gave you the loan and that it wasn’t intended for use by others.
If you sell your home and don’t pay off the lender, the lender can demand that the balance be paid
back immediately.

If, in the course of selling the home, you find a buyer willing to buy it on contract — that is
to say, over time — you should be very careful in constructing that arrangement. In a contract for
sale for deed, the buyer ends up in possession of the home. Once in possession, the axiom that “
possession is nine-tenths of the law” kicks in. You lose control over the day-to-day working at the
home, but the debt to the lender still has to be paid back. You need to pay your lender, and your
contract buyer has to pay you the amount owed on the contract for deed.

As you can imagine, this type of situation has been a used by scam artists who “buy” the home
but don’t repay the debt. Then they turn around and refinance the property and scrape the money
off, or they resell the property and never repay the debt owed.

Be sure to consult with a real-estate lawyer to understand the risks involved. He or she can
help you record that document, if the two of you determine it is in your best interests.

As you learn more about the process of owning this home, the path forward might become clear:
You might want to sell it as quickly as possible, or rent it and keep it for some time to reap any
benefits that you might get from an investment property. You might even consider whether an
installment contract for deed with the right buyer could help you in the years to come.